Apple responds to tax accusations: we pay an “enormous amount of taxes”

Is creating jobs and playing by the rules enough when there's $110 billion in the bank?

Apple has responded to a New York Times piece accusing the company of "[sidestepping] billions in taxes" by arguing that it has created hundreds of thousands of US jobs while focusing on innovation. The company says it "pays an enormous amount of taxes" to local, state, and federal governments, and maintains that it conducts business "with the highest of ethical standards."

The piece that Apple is responding to was published over the weekend. The massive feature details how Apple strategically places parts of its business in various states and countries that facilitate a favorable corporate tax rate. The strategies outlined in the Times report are common among American corporations—a fact acknowledged by the Times itself—but Apple's high profile and large pile of cash ($110 billion, as of the second fiscal quarter of 2012) have put it under the corporate tax spotlight.

Apple says it complies with all applicable laws and accounting rules. "By focusing on innovation, we’ve created entirely new products and industries, and more than 500,000 jobs for U.S. workers—from the people who create components for our products to the people who deliver them to our customers," the company wrote in its response to the New York Times. "Apple also pays an enormous amount of taxes which help our local, state and federal governments. In the first half of fiscal year 2012 our US operations have generated almost $5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of US income tax."

Jacqui Cheng
Jacqui is an Editor at Large at Ars Technica, where she has spent the last eight years writing about Apple culture, gadgets, social networking, privacy, and more. Emailjacqui@arstechnica.com//Twitter@eJacqui

213 Reader Comments

That said, from what I hear BP got away with a next-to-zero tax bill last year because they wrote off cleanup efforts in the gulf from a problem they created. I think we all know which company should be a priority for the Times et. al. to go after... and it ain't Cupertino's Orchard.

That said, from what I hear BP got away with a next-to-zero tax bill last year because they wrote off cleanup efforts in the gulf from a problem they created. I think we all know which company should be a priority for the Times et. al. to go after... and it ain't Cupertino's Orchard.

Of course they are. Like most big companies. But the way they do it happens to be "legal". That's the problem in a system of laws. You cannot make laws and then be surprised when people take advantage of them. The more complex the laws the more holes there are.

In the end corporate taxes should be much lower and simpler. Wouldn't even necessarily mean that the state makes less money but perhaps tax lawyers would make less and that's always a good thing. Problems come up when governments try to pick winners and losers and dole out favors with special tax rebates. (Which is of course hard to resist)

I don't see an Apple issue here. There is a big problem with the tax system and this is a nice illustration of it. I can't blame Apple for using the existing system the best they can. But I can blame congress for not getting it together and figuring out how to design a workable and fair tax system.

That said, from what I hear BP got away with a next-to-zero tax bill last year because they wrote off cleanup efforts in the gulf from a problem they created. I think we all know which company should be a priority for the Times et. al. to go after... and it ain't Cupertino's Orchard.

It is humorous how such news has become such an afterthought in American culture.

One wonders if Americans understood that every tax dollar dodged by a corporation or extremely wealthy individual actually end up as a dollar to be paid by the poor and middle class Americans instead whether they'd still not care or if they'd increase the call for "smaller government." (cost shifting from the government directly onto their own selves with a layer of profit added on since they'd be forced to go through the for profit market for the benefits they presently enjoy from government levied taxes)

I'm kind of sick of all this jobs worship (no pun intended). Corporations will excuse themselves from murder with "but we create jobs!!". Immoral behavior is always immoral, regardless of what else you do as a person or corporation.

500000 US workers? By Apple's own documentation they only have 77,000 US based employees.

No, 500,000 jobs as a result of their business, not that they themselves added 500,000 new Apple employees. How valid this particular number is is something else entirely.

Either way Apple isn't doing anything that anyone else isn't doing, they just have the misfortune of spending the past 20-30 years building a company image of being cool, hip, with it, thinking different, being conscientious about some nebulous something or another, being progressive, etc. Then when they get "caught" behaving just like everyone else with Chinese slave labor, creative tax practices, etc., they look like hypocrites and everyone gets worked up into a tizzy.

500000 US workers? By Apple's own documentation they only have 77,000 US based employees.

I think they count the whole supply chain. Like the chip companies designing the chips in Apple products, the software developers creating iOS apps etc. pp.

Of course a bit silly because most of them would be around even if Apple was a Korean company. But not totally unfair. Having big successful companies has an important positive effect on the whole economy. Often people say that small companies are the companies making jobs but they also destroy them very fast and often depend on the big companies for existence.

So everything Apple is doing is completely legal? And tons of other companies do this? And Apple has absolutely zero legal responsibility to pay more?

Whoever wrote the Times article should be forced to look for a new job.

Change the word Apple to Google or Microsoft. Do you feel the same way?

Yes. It's a basic smear piece. Of course companies look to minimize tax exposure. You do it on your personal taxes as well. In fact, the company has a responsibility to their share holders to minimize their taxes. To do otherwise would get them sued. I don't care if the piece were written about BP, Monsanto, or whatever distasteful company you can think of.

I don't see an Apple issue here. There is a big problem with the tax system and this is a nice illustration of it. I can't blame Apple for using the existing system the best they can. But I can blame congress for not getting it together and figuring out how to design a workable and fair tax system.

If Congress attempted to fix this, I'd be willing to bet that Apple would lobby like hell to defeat it, though.

Why is the New York Times on a crusade to raise taxes? You can't tax a corporation, you can only tax its customers. When someone wants to go after a company and make them pay more, what they are really saying is they want everyone who buys from that company to pay extra for the service or good they are purchasing. Apple's taxes are paid for on each and every iphone and ipad.

Shouldn't we begin asking what the government does with that money? Seems NYTimes wants Apple to be accountable, but doesn't begin to question why we would give more of our money (taxes) to an institution that has shown itself such a poor steward of our money.

500000 US workers? By Apple's own documentation they only have 77,000 US based employees.

And those 77,000 employees pay rent, buy groceries, drive cars, etc. There is also a huge development community based around iOS application development and services, as well as an industry for accessories and services based around other Apple products (those iPhones and MacBooks don’t deliver themselves, for example). I’m not saying that Apple’s optimistic estimate is true, but to only count the people directly employed by Apple themselves is retarded. Same goes for other huge corporations and government entities, obviously.

500000 US workers? By Apple's own documentation they only have 77,000 US based employees.

Apple is estimating the job multiplier effect, all those retail jobs, parcel delivery jobs, etc that presumably wouldn't be there if people didn't buy Apple products. Probably an overestimation, but not zero either.

Okay, so we all know corporations do that - try their best to avoid paying taxes as much as possible. Nothing new here. However, I did find it interesting that they're boasting about paying $5 billion in taxes, but have $110 billion "in the bank" - doesn't that mean they're paying less than 5% tax? I'm probably missing something because that seems excessively low.

some food for thought taxes have been though to be unconstitutional for most of american history...

Umm.. No.

Constitution wrote:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence[note 1] and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

I don't see an Apple issue here. There is a big problem with the tax system and this is a nice illustration of it. I can't blame Apple for using the existing system the best they can. But I can blame congress for not getting it together and figuring out how to design a workable and fair tax system.

If Congress attempted to fix this, I'd be willing to bet that Apple would lobby like hell to defeat it, though.

This is why you have to have the 'smear' campaign. you have to create a will to change within the public consciousness through articles like these THEN when you run the bill through the legislative body it is much less vulnerable to opposition.

Agreed though ultimately this is a legislative fix. You cannot blame people for taking advantage of tax loopholes but you can create a feeling that it is not the right thing to do.

However, I did find it interesting that they're boasting about paying $5 billion in taxes, but have $110 billion "in the bank" - doesn't that mean they're paying less than 5% tax? I'm probably missing something because that seems excessively low.

Last time I checked the US didn't have a wealth tax. I.e. you do not pay tax for the amount you have in the bank but for the money you earn. So what they would be paying tax for is the interest on these 110b, although in the states that interest tax rate is quite low and no idea if it applies to companies.

I don't see an Apple issue here. There is a big problem with the tax system and this is a nice illustration of it. I can't blame Apple for using the existing system the best they can. But I can blame congress for not getting it together and figuring out how to design a workable and fair tax system.

If Congress attempted to fix this, I'd be willing to bet that Apple would lobby like hell to defeat it, though.

And congress would cave because they know that voters are far more concerned with what their neighbor is doing (e.g. marriage) than whether our tax code is full of loopholes that can be exploited by large corporations. It's a bit sad to see small town politics dominating the national scene.

I have worked for decent sized to major companies my entire working life and the only one that hasn't used these kind of tactics is the county government entity that I currently work for. This is a corporate way of life allowed by local, state and federal laws; if this was something actually frowned upon we would be seeing lots of "XXXXXX sues Apple to collect taxes" the way we see the same concerning Amazon.

Okay, so we all know corporations do that - try their best to avoid paying taxes as much as possible. Nothing new here. However, I did find it interesting that they're boasting about paying $5 billion in taxes, but have $110 billion "in the bank" - doesn't that mean they're paying less than 5% tax? I'm probably missing something because that seems excessively low.

The two numbers aren't comparable, as the $110 billion is the amount of sitting assets, but outside of property taxes, it's very rare in the US to tax assets that are just being held. Instead, the US generally taxes money when it changes hands, so the fact that they have a bunch of money sitting in a bank doesn't affect their taxes one way or the other.

So everything Apple is doing is completely legal? And tons of other companies do this? And Apple has absolutely zero legal responsibility to pay more?

Whoever wrote the Times article should be forced to look for a new job.

Apple may have a moral responsibility to pay more. The fact that Apple connects to people more than other corporations through their marketing means that this can be a strong facilitator to exposing not just their lack of living up to that responsibility but other corporations as well. The reality is a lot of people don't care about corporate responsibility and the Times has to target articles in a way that is interesting to people.

People might legally get away with a murder and have no obligation to go to jail. Tons of other people may do this. That doesn't mean they are morally right to do so and that any individual story is less important to report on than others.

You're missing the point. Yes, you can tax a corporation, but the only real effect of that is to indirectly raise the price of the goods or services they produce. They will necessarily pass those taxes (just like any other cost of doing business) onto customers or they will go out of business.

Okay, so we all know corporations do that - try their best to avoid paying taxes as much as possible. Nothing new here. However, I did find it interesting that they're boasting about paying $5 billion in taxes, but have $110 billion "in the bank" - doesn't that mean they're paying less than 5% tax? I'm probably missing something because that seems excessively low.

Appeldid not accumulate the $110 billion in just last year. It was over a period of many years.

I have worked for decent sized to major companies my entire working life and the only one that hasn't used these kind of tactics is the county government entity that I currently work for. This is a corporate way of life allowed by local, state and federal laws; if this was something actually frowned upon we would be seeing lots of "XXXXXX sues Apple to collect taxes" the way we see the same concerning Amazon.

The NYT just chose a hot company to improve page views.

If you genuinely wanted to raise awareness of the tax loophole problem would you choose one of the most recognised and divisive brands on the planet or something no one had heard of?

It makes sense to focus this article on Apple, particularly as they already have a public stigma after Foxconnn; linking tax loopholes with that will only make the reader more anxious about the problem and desiring of change.

I don't see an Apple issue here. There is a big problem with the tax system and this is a nice illustration of it. I can't blame Apple for using the existing system the best they can. But I can blame congress for not getting it together and figuring out how to design a workable and fair tax system.

If Congress attempted to fix this, I'd be willing to bet that Apple would lobby like hell to defeat it, though.

This is why you have to have the 'smear' campaign. you have to create a will to change within the public consciousness through articles like these THEN when you run the bill through the legislative body it is much less vulnerable to opposition.

Agreed though ultimately this is a legislative fix. You cannot blame people for taking advantage of tax loopholes but you can create a feeling that it is not the right thing to do.

The congresspeople see actual tax reform as shooting their future selves in the foot, though. Right now you can make changes to super complex loophole filled tax laws and pretend (and even campaign) on the idea that you worked to fix things no matter what side of the aisle you happen to be on. If they actually fixed things and gutted loopholes, any future partisan fights over taxes would be way too open and transparent to ever have any sort of change - they'd lose the ability to compromise while still looking like they got the upper-hand. They're all obsessed with brand politics. Any major overhaul of the system would be the last bit of tax related legislation passed by anything other than a partisan majority for the foreseeable future.

So everything Apple is doing is completely legal? And tons of other companies do this? And Apple has absolutely zero legal responsibility to pay more?

Whoever wrote the Times article should be forced to look for a new job.

Apple may have a moral responsibility to pay more. The fact that Apple connects to people more than other corporations through their marketing means that this can be a strong facilitator to exposing not just their lack of living up to that responsibility but other corporations as well. The reality is a lot of people don't care about corporate responsibility and the Times has to target articles in a way that is interesting to people.

People might legally get away with a murder and have no obligation to go to jail. Tons of other people may do this. That doesn't mean they are morally right to do so and that any individual story is less important to report on than others.

Apple does not have any *moral* responsibility to pay higher taxes. Nor does any other company, for that matter. Complain to your congressman/woman to have the tax rules changed and loop holes removed. If there is anyone shirking their moral responsibility here, it is Congress.